For example, when an investor buys preferred shares of a company for $20 each, converted into common shares one for one, and the company subsequently proceeds to a new round of capital raising that values the common shares at $15 each (a downward cycle), the investor`s shares would be devalued (economic dilution). The investor was unable to convert his preferred shares into common shares without losing 5$US per share. An anti-dilution economic provision would protect that investor by stipulating that, if it issues shares at a lower price than the previous round in which that preferred shareholder invested, it may receive more common shares upon conversion to make them whole. 5.3 The heir guarantees that the shares, whether registered or not, are not congested or other, and that they are absolutely not congested (with the exception of a capital payment obligation for partially paid-up shares). Weighted average anti-dilution is also a form of economic protection against dilution and gives an investor the right to acquire shares at a price that takes into account the difference between the old and new price and is more favorable to companies than the full anti-dilution of the ratchet. An SHA may contain terms found in the statutes; However, a SHA is generally larger and offers greater protection to shareholders. There is no standard form that makes SHAs flexible to meet the specific needs of shareholders. Articles and ASAs are often complementary. In many jurisdictions, the articles of association can only be amended by a special decision (75% or more of the shareholders present and voting at a general meeting). However, a SHA often requires unanimous agreement for its revision, but may also require the approval of the super-majority (a number of votes well in excess of half of the voting shares, but less than 100%). In the shareholder agreement or articles of association, the company may require shareholders to impose the sale of their shares in the event of a particular event. Some of these “triggering events” may be: if a shareholder does not subtract all or part of his share of shares in cash within the specified period, the other shareholders can acquire these remaining shares.
If a cash call leads to the acquisition of new shares by a shareholder, directly or via a loan convertible into shares, the net result is the dilution of the participation of shareholders who did not participate in the cash call. A shareholder agreement (SHA) is a contract between the shareholders of a company and often the company itself….